Israeli PM says he will make no concessions after Obama aide issued scathing criticism of his policies on Palestine.

The White House has warned that continued settlement plans would distance Israel from its closest allies [EPA]

Israeli Prime Minister Benjamin Netanyahu has issued a defiant statement, vowing to make no concessions to the Palestinians after a scathing criticism by a White House official over his policy on the occupation and settlement expansions.

"Our ultimate interests, first and foremost security and the unity of Jerusalem, are not the top priority for those anonymous sources who attack us and me personally.

"The attack on me came only because I protect the State of Israel," he said.

An article published online on Tuesday by the US publication The Atlantic quoted an unnamed official of US President Barack Obama's administration calling Netanyahu a "chickenshit" and attacking him over Israeli policy on settlement building in the occupied Palestinian territories.

"He won't do anything to reach an accommodation with the Palestinians or with the Sunni Arab states. The only thing he's interested in is protecting himself from political defeat... He's got no guts," the official told journalist Jeffrey Goldberg.

'Red-hot anger'

In the article, Goldberg further wrote that there was "red-hot anger" within the Obama administration over Israel's settlement building in the West Bank and East Jerusalem.

On Monday, the Israeli government said it is advancing construction plans to build about 600 additional houses in Ramat Shlomo, and 400 in the Har Homa districts of East Jerusalem.

The Palestinians seek East Jerusalem, home to the city's most sensitive holy sites for Jews, Muslims and Christians, as their future capital and oppose any Israeli construction there.

The US and international community have slammed Israel for recent plans to build thousands of new Jewish settler homes on Palestinian land in the occupied West Bank and annexed East Jerusalem -- moves that are seen as making peace and the creation of a Palestinian state almost impossible.

The White House warned in early October that continued settlement plans would "distance Israel from even its closest allies."

The White House anger has also been fuelled by criticisms that Israeli Defence Minister Moshe Yaalon made about the efforts of US Secretary of State John Kerry, to negotiate talks between Israel and Palestinian representatives, and the ongoing negotiations with Iran.

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